saudi arabia 2018 outlook | january 2018...saudi arabia 2018 outlook | january 2018 p a g e | 5 be...

SAUDI ARABIA 2018 OUTLOOK | January 2018 P a g e | 2

Table of Content

A. Executive Summary .......................................................................................................................... 3

B. Saudi Economic Outlook 2018 ....................................................................................................... 6

C. Equities outlook ............................................................................................................................... 10

D. Real Estate Sector Outlook ........................................................................................................... 19

E. Private Equity Outlook.................................................................................................................... 26

F. Conclusion ....................................................................................................................................... 30

G. Annexure 1: Chart Pack ............................................................................................................... 31

I. Macroeconomic Indicators .................................................................................................. 32

II. Oil Indicators ............................................................................................................................ 38

III. Stock Market Indicators ......................................................................................................... 39

IV. Corporate earnings ................................................................................................................ 40

V. Tadawul Sector Earnings Performance................................................................................ 41

H. Annexure 2: Saudi Arabia Key Statistics ..................................................................................... 42

Executive Summary


A. Executive Summary Key factors Key positives Key Risks Outlook

Economic

Outlook

GDP Growth

Oil Prices

Oil Production

Fiscal policy

Credit growth

Monetary policy

Fiscal Deficit

Large government

spending

Oil prices on the rise

Room to raise debt and

preserve forex reserves

Entrenched slowdown

taking time to turnaround

economy

Production cut deal

collapse

Interest rate increases

Ca

utio

usl

y P

osi

tive

Equities

Outlook

Earnings growth

MSCI /FTSE inclusion

Trading volumes

Dividend yield

Valuations

Possible inclusion in FTSE

and MSCI indices

Consumption related

sectors to benefit from

government spending

Possible Aramco listing to

boost sentiment

Delay in inclusion in

benchmark indices

Price increases to impact

consumer sentiment

Low foreign investor

interest

Po

sitiv

e

Real Estate

Outlook

Demand Supply Balance

Occupancy levels

Rent growth

Economic Outlook

Government support

Government incentives for

affordable housing to

increase supply and

encourage demand

Rising rates

Rents stagnation

Lon

g t

erm

Po

sitiv

e

Private

Equity

Outlook

Number of funds

Deal activity

Exit via NOMU

Demand for private

capital

Economic revival leading

to greater investor interest

in Private Equity funds

High valuations; too many

funds chasing fewer

opportunities

Lon

g t

erm

po

sitiv

e

Executive Summary


Executive Summary

After a truly forgetful 2017, Saudi Arabia is looking forward to 2018 with renewed hope. Oil prices were

subdued for most part of the year. The government kept a tight leash on spending for first three

quarters (government expenditure for 9M2017 increased only 0.5% year-on-year), while private sector

also held back on investments, reflected in credit growth. However, the end of 2017 brought good

news. Oil prices started moving up, as the market realized the commitment of oil producers

participating in the production cut. Saudi government accelerated spending in Q4 2017 (38% year-on-

year increase), which has started to reflect in economic data being released now with a lag. The

prospects for 2018 look much better, owing to large government spending plans on both capital and

current account.

Economic prospects improve

The year 2017 saw an economy in decline -

GDP de-growth of 0.7% (Figure 31, Annexure 1),

consumer inflation in negative territory for 10

months (Figure 29, Annexure 1), declining credit

growth (Figure 44, Annexure 1) for most part of

the year, cement sales among the lowest in

past several years (Figure 32, Annexure 1) and

similar other macroeconomic indicators – partly

contributed by lower oil prices (Figure 78,

Annexure 1) and subsequent tightening of

government spending in first three quarters of

2017. However, with oil markets improving in last

few months of 2017, and government spending

in Q4 2017, few demand indicators have

started to improve. The PMI Index (Figure 31,

Annexure 1) started to move up consistently,

while non-oil GDP growth (Figure 27, Annexure)

also was on the up move. The year 2018 has

begun on a positive note, with the International

Monetary Fund (IMF) increasing its estimate of

GDP growth to 1.6% from 1.1% earlier (Figure 1,

Saudi Economic Outlook 2018 section).

Equity markets looking for key triggers

Equity markets, in spite of a late surge towards

end of the year, could only manage to end flat

for the year. However, a late boost to

government spending in December quarter, an

expansionary budget for 2018 (Figure 2, Saudi

Economic Outlook 2018 section) and rising oil

prices augur well for Saudi Arabian economy

and capital markets, notwithstanding the

introduction of Value Added Tax (VAT), fuel and

electricity price increases and expat tax. Saudi

equity markets look set to benefit from

generous government spending in 2018

(assuming it is fully realized), both in terms of

project/capital expenditure (beneficiaries –

construction, cement, capital goods) and

current expenditure in the form of special

allowances, citizens account program as well

as policy changes in housing sector

(beneficiaries – consumption related sectors

such as retail, food and beverages, real estate).

The increased possibility of inclusion of Saudi

Arabia in MSCI and FTSE indices in 2018 will start

attracting foreign institutional investments in to

Saudi equity markets. A possible IPO of Aramco

in second half of 2018 will be a landmark event.

Real Estate market to take its time to revive

Saudi Real Estate sector witnessed the

government’s renewed focus on affordable

housing and policy coordination in 2017. Saudi

Arabian Monetary Authority (SAMA) increased

the mortgage limit for housing loans from 75% in

2016 to 85% in 2017, and now 90% in early 2018.

In parallel, Real Estate Development Fund

(REDF) announced supporting interest

payments on mortgage loans for Saudi citizens

for up to SAR 500,000. More such coordinated

actions by multiple government agencies may

Executive Summary


be expected in 2018. These measures will help

towards meeting the large residential housing

demand. The office and retail space may take

time to improve as occupancy levels change

with greater economic activity, which should

reflect in rate levels (Figure 37, Annexure1). We

also witnessed in 2017 a growing trend of listing

of Real Estate Investment Trusts (REITs) towards

second half of 2017, which appears to continue

in 2018 as well.

Private Equity market long term prospects in

place

Saudi Private Equity space is also gaining

traction along with rest of economy. While the

government is encouraging small and medium

enterprises by having Public Investment Fund

(PIF) earmark part of their investment for such

enterprises, private equity investors are also

increasing fund raising and seeking investment

deals in specific sectors - such as consumption,

healthcare, education – which have long term

demographic drivers and appear relatively

insulated from the fluctuations in oil prices and

changes in fiscal policy. Valuations have also

become more attractive with the fall in public

equity markets. On the backdrop of Saudi

Vision 2030, which envisages a greater role for

private companies’ contribution to economy,

the need for capital by such companies will

provide opportunities for private equity

investors. The availability of NOMU as an exit

vehicle in the public equity space has also

improved attractiveness of private equity as a

viable investment route.

Key risks to watch

Notwithstanding the positive developments and

prospects, the Saudi Arabian markets will also

face key risks. Actual government spending

during the year needs to match the

announced allocations. Consumers, at least the

Saudi citizens need to respond positively to

government’s special allowances and

incentives by spending, instead of higher

savings in the wake of increased fuel and

electricity prices. Reduction in expat population

post the introduction of expat tax also reduces

consumer base. With the US Federal Reserve set

to raise rates at least thrice in 2018 and beyond,

SAMA will follow suit to maintain the peg,

thereby raising domestic rates. On the capital

market front, large IPOs in rest of GCC are lining

up, in addition to Aramco. And from equity

markets’ point of view, any further delay in

inclusion of Saudi Arabia in FTSE or MSCI indices,

keeps away foreign investors for longer period.

An eventful 2018 to look forward to

Overall, the year 2018 promises to be eventful for Saudi Arabian economy, starting with generous

government spending after last year’s constraints, higher inflation on account of VAT and reforms in

electricity and fuel prices to close gap with market rates. At the same time, the adverse impact of price

rise on consumption will be partly cushioned by government allowances and support in the form of

beneficial policies, made possible by higher crude oil prices. The key risk is that the economy either

doesn’t respond or responds late. Past data suggests otherwise, and therefore gives hope for a

turnaround in the Saudi economy in 2018 and stronger performance in capital markets.

.

Executive Summary


B. Saudi Economic Outlook

2018 Factors Negative Neutral Positive Outlook

GDP Growth C

au

tio

usl

y p

osi

tiv

e

Oil Prices

Oil Production

Fiscal policy

Credit growth

Monetary policy

Fiscal Deficit

Saudi Economic Outlook 2018



Saudi Arabia’s economy contracted 0.7% in 2017. While the subdued oil prices for most part of the year

(average price USD 53/barrel during first nine months of 2017) played a part, the curtailed government

spending, albeit to control fiscal deficit, possibly played a bigger part. The result was slower economic

growth, reflected in several economic indicators (credit growth, inflation, money supply) as well as

industry demand indicators (cement sales, house rentals, ATM cash withdrawals, Point-of-Sales

transactions). On the positive side, the non-oil sector of the economy recorded positive growth during

the year, in spite of overall slowdown, thus indicating the relatively increasing resilience of the segment.

In the last quarter of the year, the government significantly stepped up its spending, to the extent that it

overshot its full year spending and deficit targets.

For 2018, the government has announced an expansionary budget with higher spending targeted

towards capital expenditure, and generous allowances to its employees. Some of the private sector

companies have followed suit, thus increasing the proportion of Saudi residents who will have greater

pay in hand. The effect of the higher spending may reflect in the economic indicators with a lag.

Nevertheless, Saudi government expects economic growth to revive to 2.7% in 2017. The World Bank

and International Monetary Fund (IMF) have more subdued growth estimates of 1.2% and 1.13%

respectively. We expect that greater government spending and oil prices on the rise will improve both

the economic prospects and consumer sentiment for the year 2018.

Figure 1: Saudi Arabia Annual GDP growth (%)

Source: General Authority for Statistics, The World Bank, IMF

Government spending to play a greater role in reviving the economy in 2018

Government spending in 2018 is set to increase 20% year-on-year (YoY) to SAR 1,111 bn, the highest

ever for Saudi Arabia. The capital expenditure will rise at a high rate of 13.9% to SAR 205 bn. Alongside

spending by NDF (SAR 50 billion) and PIF (SAR 83 bn), which is mostly expected to be on specific

projects/programs, the total capital expenditure for 2018 would equal SAR 338 bn, which is nearly

double of budget capital expenditure in 2017. We may expect that sectors requiring capital

expenditure, such as construction, utilities etc. would benefit from the capacity building investments by

the government.

In terms of current expenditure (increase of 3.6% to SAR 773 bn), the government appears to continue

its path of disciplined expenditure. The new addition to current expenditure is the Citizens Account

5.4

2.7

3.7 4.1

1.7

-0.7

Ministry of Finance, 2.7

5.4

2.7

3.7 4.1

1.7

-0.7

The World Bank, 1.2

5.4

2.7

3.7 4.1

1.7

-0.7

IMF, 1.60

-1

0

1

2

3

4

5

6

2012 2013 2014 2015 2016 2017 2018E

Ministry of Finance The World Bank IMF



Program which will add SAR 30 bn in 2018, but is deemed necessary by the government to minimize the

impact of higher fees, levies etc. on the lower and middle income households.

Figure 2: Estimated 2018 Expenditure vs. 2017 Expenditure (SAR bn)

Source: Ministry of Finance, E-Estimate

Special Allowances announced in January 2018 to put additional money in hands of

consumers

Saudi Arabia has announced a series of new allowances and tax breaks for state employees, military

personnel and some citizens, in order to offset for rising inflation. This is estimated to cost around SAR 50

bn (USD 13 bn) to the state exchequer in 2018. These allowances include: a monthly cost of living

allowance of SAR 1,000 for the government staff and military personnel for one year; a monthly

allowance of SAR 500 for one year to pensioners and to the beneficiaries of the social security system;

SAR 5,000 in bonus to military personnel serving in Yemen and also a 10% increase in the stipend paid to

students. In addition, the government would be bearing VAT expenses for the citizens using private

healthcare and education services and would also pay taxes for first-time homebuyers, which would

be capped at SAR 850,000.

The new allowances have been announced within few weeks of Saudi Arabia’s budget for 2018, in

which allocation to employee compensation had been maintained at nearly same level as in 2017. The

Minister of Finance Muhammad Al-Jadaan stated that the new allowances announced were

complementary to the expenditure budget. This indicates that the funding for the new allowances

would most likely be outside the budget. We consider the allowances to improve consumer sentiment,

which had been dampened in 2017 due to curtailed government spending in first three quarters of the

year, as reflected in various economic indicators.

Fiscal deficit target for 2017 exceeded, and shifted to 2018

The fiscal deficit for 2017 was SAR 230 bn, higher than full-year target of SAR 198 bn, and exceeding

analysts’ estimates by a wide margin. Considering the slowdown in the economy, partly due to

restricted fiscal spending in 9M2017, the government appears to have prioritized spending over fiscal

targets. The target for 2017 appears to have been shifted to 2018, with SAR 195 bn deficit aimed next

year.

440.0 438.0

135.0 143.0 9.0 14.0 44.0 65.0

118.0 112.0

180.0 206.0

0

200

400

600

800

1000

2017 2018ECompensation of Employees Use of Goods and Services Financing ExpensesSocial Benefits, Subsidies, Grants Other Expenses Non-Financial Assets (Capital)



Figure 3: Annual Fiscal Balance (SAR bn)


Fiscal Balance Program now extended to 2023

The government’s Fiscal Balance Program, with the earlier aim of balancing the budget by 2020, has

been extended to 2023, giving the government more room and time to focus on reviving near term

economic growth. The change was expected, as even IMF had suggested to the Saudi government

about recalibrating the pace of fiscal reforms, so as to allow the economy to adjust to the changes

introduced. Accordingly, the government has revised the program with gradual movement to fiscal

rebalancing by 2023. The fuel price related reforms have been spread out over 2018 to 2023 period,

with only jet fuel, benzene, diesel and electricity price revisions expected in 2018. Also, as part of the

program, the government has put a cap on debt-to-GDP ratio of 30% and total reserves drawdown to

USD 250 bn.

Figure 4: Revenue Expenditure and Fiscal deficit estimates till 2023 (SAR bn)


-15

-5

5

15

25

-400

-200

0

200

400

6002000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018E

Fiscal Balance (SAR bn) - LHS Fiscal Balance (% GDP) - RHS

692

783

843

909

955

1,0

49

1,1

38

890

978

1,0

06

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150

350

550

750

950

1150

2017 2018E 2019E 2020E 2021E 2022E 2023E

Revenue (SAR bn) Expenditure (SAR bn) Fiscal Balance (SAR bn)



C. Equities outlook Factors Negative Neutral Positive Overall

Earnings growth trajectory

Po

sitiv

e MSCI and FTSE possible inclusion

Trading volumes

Dividend yield

Valuations

Equities outlook


Equities outlook

Saudi equity markets look set to benefit from generous government spending in 2018 (assuming it is fully

realized), both in terms of project/capital expenditure (beneficiaries – construction, cement, capital

goods) and current expenditure in the form of special allowances, citizens account program as well as

policy changes in housing sector (beneficiaries – consumption related sectors such as retail, food and

beverages, real estate). The increased possibility of inclusion of Saudi Arabia in MSCI and FTSE indices in

2018 will start attracting foreign institutional investments in to Saudi equity markets. A possible IPO of

Aramco in second half of 2018 will be a landmark event.

Performance in 2017

The Tadawul All Share Index (TASI) ended flat for 2017. The index had a volatile year as evident from the

swings in Figure 5 and was lagging 4% year-to-date in October, before rebounding to end the year with

a marginal 0.2% growth. Since 2014, when oil prices started to fall, TASI has fallen by 15%, giving an

average annual return of -3.7%. Hopefully with oil prices moving up, TASI would follow suit.

Figure 5: TASI monthly movement (index points) Figure 6: TASI vs Oil

Source: Tadawul Source: Tadawul

The best performing sectors on TASI were Media, surging by 51%, and Retailing, gaining 14% over 2017.

Meanwhile, the worst performers were Pharma & Biotech falling by 27% and Consumer services losing

24%. Most of the consumer sectors, barring two were down in 2017 owing to controlled government

expenditure and salary cuts to public sector employees. These austerity measures, combined with the

drop in oil prices that prompted them caused the kingdom’s worst economic slowdown since the

global financial crisis. Media sector’s gain was driven by Saudi research & Marketing Group and Tihama

Advertising & Public Relations Co., both gaining more than 70% year-to-date in 2017. The decision to

reverse the salary and benefits cut for the public sector employees, improved oil prices, and TASI’s

possible inclusion to FTSE and MSCI indices were the chief reasons for the index to rebound in the latter

half of 2017.

6500

6700

6900

7100

7300

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2016

Jan

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Equities outlook


Figure 7: TASI Sector Indices’ performance 2017 (%)

Source: Tadawul

Performance vs rest of GCC and global peers

TASI performed better than most of its GCC peers, except Kuwait and Bahrain. While oil price volatility

played a part in affecting equity market performance, the rise in geopolitical tensions also played a

part. Most emerging and developed market peers recorded strong equity market performance in 2017,

led by improving economic prospects, benign monetary policies and relatively attractive valuations.

Figure 8: TASI vs rest of GCC and global peers (2017 index performance - %)

Source: Ministry of Finance

Overall TASI earnings trajectory

Growth trend – TASI and sector wise earnings for 9M2017

TASI earnings were inconsistent for three quarters of 2017. Two of the largest sectors on Tadawul index,

Materials and Banks’ PAT, increased 10% and 14% year-on-year respectively for Q3 2017. In terms of

sectors, Energy’s year-on-year earnings growth for Q3 2017 was the highest at 560%, while Media

-26.2

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Pharma & Biotech

Consumer Services

Transportation

Diversified Financials

Commercial Services

Telecommunication

Energy Industry

Capital Goods

Health Care

Consumer Durables

Real Estate

Utilities

Insurance

Food & Beverages

Materials Industry

Banks

Food retail

Retailing

Media

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Equities outlook


sector’s was turnaround story. Media sector’s PAT increased from SAR -69 million to SAR 18 million year-

on-year. The year-on-year PAT performance for consumer sectors was mostly muted or negative

mirroring the sector’s share price performance, mainly due to salary cuts and impending subsidy cuts.

Figure 9: TASI PAT and YoY growth (Quarterly)

Source: Reuters Eikon

Table 1: Tadawul Sector Earnings Performance (sorted by market cap)

Earnings (SAR mn) Market Cap (SAR mn) Q3 2017 Q3 2016 Q2 2017 % YoY % QoQ

Materials 575,453 8,702.4 7,908.4 6,077.1 10.0 43.2

Banks 508,526 11,374.1 9,951.1 11,324.0 14.3 0.4

Telecommunication Services 157,744 2,390.0 1,664.4 2,203.6 43.6 8.5

Real Estate 108,710 381.0 288.0 351.1 32.3 8.5

Utilities 89,143 5,300.6 4,434.4 2,269.4 19.5 133.6

Food, Beverage & Tobacco 87,531 1,585.0 952.1 1,011.0 66.5 56.8

Insurance 41,082 740.9 851.9 287.9 -13.0 157.3

Diversified Financials 36,181 261.5 134.3 227.2 94.7 15.1

Energy 31,846 784.9 118.9 486.8 560.4 61.2

Health Care 28,547 292.0 274.4 277.1 6.4 5.4

Retailing 26,822 295.9 348.3 275.6 -15.1 7.3

Transportation 13,949 285.8 341.6 243.8 -16.3 17.2

Consumer Services 13,525 232.9 355.7 314.2 -34.5 -25.9

Capital Goods 9,795 0.4 -33.9 28.2 -101.1 -98.7

Commercial Services 7,789 125.9 137.7 118.2 -8.6 6.5

Food & Staples Retailing 7,191 152.8 63.1 89.0 142.3 71.6

Media 5,674 17.9 -69.3 -16.0 -125.8 -212.1

Pharmaceuticals 3,749 7.9 6.8 46.6 17.3 -83.0

Consumer Durables & Apparel 3,223 -53.7 -40.5 -6.6 32.5 711.3

Total 1,756,477 32,878 27,687 25,608 18.7 28.4

Source: Reuters Eikon, Bloomberg, MCap as of January 21, 2018

Expectations in 2018

As per Bloomberg analysts’ consensus estimates, TASI is expected to record 13.7% year on year increase

in earnings in 2018. The book value per share for TASI in 2018 is estimated to increase 4.3%, while

dividends are expected to rise 10%.

Q3 2017 PAT

SAR 32.9 bn

Q3 2017 PAT growth,

18.75%

(150)

(100)

(50)

-

50

100

150

-30

-20

-10

0

10

20

30

40

Q1

20

08

Q2

20

08

Q3

20

08

Q4

20

08

Q1

20

09

Q2

20

09

Q3

20

09

Q4

20

09

Q1

20

10

Q2

20

10

Q3

20

10

Q4

20

10

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20

11

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12

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20

12

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20

13

Q2

20

13

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20

13

Q4

20

13

Q1

20

14

Q2

20

14

Q3

20

14

Q4

20

14

Q1

20

15

Q2

20

15

Q3

20

15

Q4

20

15

Q1

20

16

Q2

20

16

Q3

20

16

Q4

20

16

Q1

20

17

Q2

20

17

Profit (SAR Bn) -LHS Profit (% yoy) - RHS

Equities outlook


TASI and constituent sector indices valuation

TASI’s valuation has been flat for 2017, with historical price-to-earnings ratio at 16, price-to-book at 1.7

and dividend yield at 3.2%. A flat 2017 did have much bearing on TASI’s valuation. However, it

continues to be valued at a premium compared to rest of GCC valuation.

Materials, the largest sector in Tadawul All Share Index, is valued at a slight premium compared to TASI’s

with P/E of 19.1, P/B of 1.7 and dividend yield of 3.3%. Banking sector, which gained 8.2% in 2017, is

valued at a P/E of 12.2, P/B of 1.5 and dividend yield of 4%. Media sector which gained the most in 2017

is valued at a P/B of 5.7. Consumer and Retail sectors are valued at a premium compared to TASI’s

valuation.

Table 2: Tadawul Sector Valuation Table (sorted by market cap)

Index M.Cap $ Bn Last Close 2017 (%) P/E (TTM) P/B (TTM) D/Y (%)

Materials Industry 153.5 5239 1.4 19.1 1.7 3.3

Banks 135.6 5942 8.2 12.2 1.5 4.0

Telecommunication 42.1 4357 -15 14.6 1.6 4.1

Real Estate 29.0 4449 -6.4 51.0 1.7 1.0

Utilities 23.8 4523 -6.2 8.9 1.2 3.5

Food & Beverages 23.3 4955 -0.1 43.2 2.5 0.9

Insurance 11.0 4846 -3.8 14.0 2.7 1.8

Diversified Financials 9.6 4006 -19.2 47.0 1.1 4.7

Energy Industry 8.5 4465 -14 15.2 1.5 4.6

Health Care 7.6 4730 -11.5 22.5 2.9 2.4

Retailing 7.2 5906 14.7 17.5 4.2 3.8

Transportation 3.7 4082 -21.3 15.7 1.7 4.1

Consumer Services 3.6 3861 -23.7 11.9 1.3 2.4

Capital Goods 2.6 4321 -13 14.9 1.1 2.8

Commercial Services 2.1 4196 -16.6 13.4 3.8 6.1

Food retail 1.9 5565 11 21.2 3.2 3.0

Media 1.5 8422 51.1 NA 5.8 0.0

Pharma & Biotech 1.0 4123 -26.2 10.3 1.4 3.2

Consumer Durables 0.9 4038 -10.9 30.1 1.0 1.4

Source: Bloomberg, MCap, PE, PB, Dividend yield as of January 21, 2018

Comparison of TASI valuation with rest of GCC markets

Saudi Arabia, being the largest market in the GCC region, also has the most investor interest. However,

TASI’s valuation is relatively higher compared to most of its peers, which is partly explained by its

relatively higher earnings growth expectations, and also owing to its larger size of markets among peers.

Going forward, the similar pattern is expected to continue as the most of the major factors expected to

affect all GCC countries in 2018 (VAT and fuel price reforms, interest rate movements due to US Fed

rate hike, oil price changes) are of similar nature.

Equities outlook


Figure 10: TASI vs rest of GCC valuations

Source: Ministry of Finance; Valuation as of January 15, 2018

Overall, the index is still attractively valued compared to historical levels among its peers. On the

backdrop of positive macroeconomic and policy action (expansionary government budget, progress

on possible inclusion of TASI index in FTSE and MSCI indices), TASI is expected to be an attractive market

for investors.

Tadawul’s total value traded and liquidity

Tadawul’s monthly stock market turnover has been on the decline for the past five years as can be

seen from Figure 11. The fall in oil prices and subsequent drying up of liquidity in the market mainly

appear to have resulted in lower investor and trading interest. However, the trend appears to be

reversing, although marginally. The average daily traded volume, which also reflects the overall activity

level, can be seen in Figure 8 to be distinctively on the decline. However, in 2018 till date (January YTD),

the average daily turnover has picked up and is above 2017 average. We expect the investment and

trading interest in 2018 to be revived on back of several key economic policy announcements.

Figure 11: Stock Market Turnover- monthly (SAR

bn) Figure 12: Average daily turnover (SAR bn)

Source: Tadawul, SAMA Source: Tadawul; Note: *-Till January 17, 2018

IPO action

Since 2012, the number of Initial Public Offerings (IPOs) on Tadawul was on a decline, in tandem with

lower sentiment following fall of oil prices and lower market activity. However, in 2017 Saudi IPO market

revived with 17 issuances. Out of the total issuances, nine were on the parallel market NOMU that

started in early 2017, and seven issuances were of Real Estate Investment Trusts (REITs), leaving only one

corporate listing on main Tadawul exchange (Zahrat Al Waha). In 2018 so far (as of January 17), there is

-5

0

5

10

15

20

25

Saudi Arabia Kuwait Qatar Oman Abu Dhabi Dubai Bahrain

PE Div Yield (%) PB Earnings growth (%) - 2017E RoE (%)

0

50

100

150

200

250

300

Jan

-13

Jul-1

3

Jan

-14

Jul-1

4

Jan

-15

Jul-1

5

Jan

-16

Jul-1

6

Jan

-17

Jun

-17

De

c-1

7

5.5

8.5

6.6

4.7

3.3 3.6

0

2

4

6

8

10

2013 2014 2015 2016 2017 2018*

Equities outlook


only one more company with its prospectus filed (AlBaha Investment & Development). However, as the

government envisages the economy to revive and private sector companies to play a greater role in

economic contribution, the number of companies seeking the public markets route to raise

capital/provide exit to private equity investors will rise, thereby leading to a more vibrant IPO market. In

2018, the biggest watched IPO will be of Saudi Aramco, expected in second half of the calendar year.

Figure 13: Saudi Arabia Initial Public Offerings

Source: Tadawul

SAUDI ARAMCO IPO in 2H 2018?

The mega IPO of Saudi Aramco is expected to occur in the second half of 2018. The listing of the

world’s largest oil company will be a landmark event for Saudi Arabia and equity markets around the

world. While the listing was first talked about in 2016, it is only now that related activities have started to

pick up.

As of January 1, 2018, the company was constituted as a joint stock company, with a corporate

structure including a Board of Directors as the governing body. The listing will be most likely a dual listing

with the local portion being on Tadawul and the international one on one of the three developed

market exchanges of New York, London and Hong Kong. Further, bankers will be finalized in the coming

months and roadshows will begin.

NOMU has been underwhelming, but could be here to stay

Another feature of 2017 was the start of parallel market NOMU, which witnessed 9 listings. The platform

was started to encourage small and medium enterprises to list with easier listing norms than those of

Tadawul. The platform provides an opportunity for private equity investors to use the public listing route

to exit their investments. However, the performance of stocks on NOMU has been underwhelming. The

NOMU index recorded a nearly 50% drop by end of the year, which will weigh on the mind of potential

corporates aiming for listing as well as potential investors in IPOs. Further, trading volumes on NOMU has

been lesser than expected. We expect CMA or another government body to further promote NOMU

by some form of market making incentive mechanism.

7 5 6

4 3 1

7

9

0

4

8

12

16

20

2012 2013 2014 2015 2016 2017

TASI REITs NOMU

Equities outlook


REITs take the spotlight

The listings of Real Estate Investment Trusts (REITs) were in vogue in 2017, with as many as seven listings in

2017 and another one in January 2018, with total size of funds SAR 5.1 bn. There are seven more REITs in

the wings waiting for their listing turn, with total size SAR 7.4 bn.

Table 3: REITs listed in 2017 and 2018 (Till January 24, 2018)

REIT Listing date Fund Size (SAR mn)

Al Ahli REIT (1) Jan. 8, 2018 1375

Musharaka REIT Oct. 2, 2017 880

Mulkia REIT Nov. 5, 2017 677*

Jadwa REIT AlHaramain April 30, 2017 660

AlMa'athar REIT Aug. 22, 2017 613.7

Al Masha’ar REIT Jan. 18, 2018 572.4

Riyadh REIT Nov. 13, 2016 500

Taleem REIT May 30, 2017 285

AlJazira Mawten REIT Feb. 15, 2017 118

Source: Argaam.com; *Acquired a property on Jan. 8 thereby increasing fund size to SAR 677 million from SAR 600 million.

Table 4: REITs in the pipeline to be listed (status as on January 24, 2018)

REIT Status Fund Size (SAR mn)

Al Rajhi REIT Open for subscription 1621.9

Jadwa REIT Saudi Subscription Closed 1580

Derayah REIT Subscription Closed 1172

Wasatah REIT Open for subscription 1080

AlNefaie – Umm Alqura REIT Fund Open for subscription 692

SEDCO Capital REIT Not listed yet 650

Source: Argaam.com; Swicorp Wabel REIT was not included for lack of information.

The total SAR 12.5 bn funds either listed or to be listed have investments across a range of properties

spanning residential, commercial, office, warehousing and other end-uses. These funds have total 81

fully-developed properties, two usufructs, and three real estate projects under development.

Table 5: REITs with the underlying properties held

REIT Property Segment Number of Assets

Al Rajhi REIT Commercial, offices, educational,

warehouses 13 fully developed and owned properties

Derayah REIT Residential, offices, stores, warehouses

and hospitality

12 fully developed and owned, 2 usufructs, 1

under development

AlMa'athar REIT Office, warehouses, residential, stores 11 fully developed and owned, 1 under

development

SEDCO Capital REIT Hotels, commercial, offices, residential 7 fully developed and owned

Riyadh REIT Offices, hospitality and hotels, stores 6 fully developed and owned, 1 under

development

Mulkia REIT Residential, industrial, offices, stores 4 fully developed and owned, 1 fully

developed, 76% owned *

Musharaka REIT Residential, warehouses, hospitality and

hotels 5 fully developed and owned

Jadwa REIT Saudi Residential, commercial, warehouses,

educational 5 fully developed and owned

AlNefaie – Umm Alqura

REIT Fund Hotels, commercial 4 fully developed and owned

Al Masha’ar REIT Hospitality and hotels, stores 3 fully developed and owned

Equities outlook


REIT Property Segment Number of Assets

Wasatah REIT Hotels 2 fully developed and owned

Jadwa Reit AlHaramain

Fund Hospitality and hotels, stores 4 fully developed and owned ***

Al-Ahli REIT (1) Hospitality and hotels, stores 2 fully developed and owned

AlJazira Mawten REIT Warehouses 1 fully developed and owned (Contains 6

warehouses)

Taleem REIT Educational 1 fully developed and owned

Source: Argaam.com; * Acquired 76% of a property in Riyadh post listing; ** Acquired a property in Riyadh post listing; ***

acquired two properties in Makkah post listing.

Possible inclusion of TASI in FTSE and MSCI benchmark indices draws near

One of the major landmark events for Saudi Arabian equity market to look forward to in 2018 would be

possible inclusion in FTSE and MSCI Emerging Market benchmark indices. The formal inclusion in these

indices would lead to global asset management firms to increase their exposure to Saudi Arabian

equities in order to align their portfolios to these benchmarks. While the possible inclusion of Saudi

Arabia in the benchmark indices has been on the cards since 2015, it is only now that the

developments are accelerating towards actual inclusion.

In case of FTSE indices, during its review in September 2017 country classification annual review, the

index provider refrained from adding Saudi Arabia, while also expecting that it expects the country to

soon meet the criteria to be promoted from unclassified status to secondary emerging market. The next

review is due in March 2018. The inclusion of Saudi Arabia is expected to lead to passive fund inflows,

presuming Saudi Arabia has 2.7% weight in the index, as per analyst estimates. The estimated weight is

excluding possible Aramco listing, which could increase Saudi Arabia’s weight in the index to close to

5%.

With respect to MSCI, in June 2017, Saudi Arabia was added to its watch list for a potential upgrade in

June 2018. If the upgrade materializes, the actual inclusion of Saudi Arabia in the MSCI Emerging

Market Index would happen in two phases – in May 2019 and August 2019. The inclusion of Saudi

Arabia is expected to lead to active fund inflows in to its equity market up to an estimated USD 9 bn,

presuming Saudi Arabia has 2.4% weight in the index, as per MSCI indications. The weight would be

distributed across 32 Saudi stocks, excluding Aramco. With Aramco, Saudi Arabia’s weightage would

nearly double to close to 5% in the benchmark index.

Saudi Arabia has been vying for inclusion in benchmark indices since 2015, as part of larger plan of

diversification of the economy and ensuring a vibrant capital market as a key feature of the economy.

It has taken a series of steps to pursue its goals. The market was opened to Qualified Financial Investors

(QFIs) to directly take stake in listed equities, in 2015. The permitted stake, in individual companies and

in the market as whole, has been gradually increased. The qualification criteria, such as minimum Assets

under Management (AUM), have also been progressively relaxed. QFIs have been now allowed to

participate in IPOs. While QFIs have been allowed to take stakes in Saudi Arabian listed companies up

to 49% of equity, the actual percentage holding has been quite low so far. The inclusion in benchmark

indices would lead to net inflows of funds in to Saudi equities, similar to the inflows witnessed in case of

UAE and Qatar at the time of their inclusion in benchmark indices.

Equities outlook


D. Real Estate Sector

Outlook Factors Negative Neutral Positive Overall

Demand Supply Balance Lo

ng

te

rm P

osi

tiv

e

Occupancy levels

Rent growth

Economic Outlook

Government support

Demographic demand drivers

Real Estate Sector Outlook



Saudi Real Estate sector witnessed the government’s renewed focus on affordable housing and policy

coordination in 2017. Multiple official agencies – Saudi Arabian Monetary Authority (SAMA), Real Estate

Development Fund (REDF) – announced policies and measures encouraging home ownership. A new

entity - Saudi Real Estate Refinance Company (SRC) – was formed by Public Investment Fund (PIF) to

support the real estate sector. The past year also witnessed a growing trend of listing of Real Estate

Investment Trusts (REITs), especially towards second half of 2017, which appears to continue in 2018 as

well. Overall, multiple agencies appear to work towards the goals of National Transformation Program

2020, under which the government plans to increase Saudi home ownership to 52% from 47% earlier.

More such coordinated action by multiple government agencies may be expected in 2018. The

construction and infrastructure sectors also appear set for more activity in 2018, due to large capital

allocation by the government in the budget.

Credit from banks to real estate and GDP growth

Credit loan to real estate sector grew 8.7% YoY to SAR219.9 bn in Q3 2017 with retail credit growing 7.5%

YoY to SAR117.7 bn and corporate credit rose 10.0% YoY to SAR102.1 bn. The proportion of retail credit

in total real estate loan declined to 53.6% in Q3 2017 from 60.3% in 2011 while corporate loan accounts

for 46.5% in Q3 2017, higher than 39.7% in 2011. With increase in real GDP over the past 7 years, the

proportion of total real estate loan from bank has also raised to 8.5% in Q3 2017 of overall total bank

loans as compared to just 3.0% in 2010.

Figure 14: Real estate loans by banks Figure 15: Proportion of loans grew with GDP

Source: SAMA Source: SAMA, IMF October 2017 report

Moreover, Saudi central bank introduced various measures to support mortgage financing. Under its

National Transformation Program 2020, the government plans to increase Saudi home ownership to 52%

from 47% earlier, and also aims to increase the percentage of real estate financing to non-oil GDP to

15% from 8%. The Saudi Arabian Monetary Authority (Sama) plans to exempt administrative fees to

mortgage holders when they switch between floating loan rate to fixed loan rates. Furthermore, SAMA

stated Mortgage holders can also move from one mortgage lender to another at no extra cost.

0%

20%

40%

60%

80%

100%

2010 2011 2012 2013 2014 2015 2016 9M

2017Retail Corporate

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

0

500

1000

1500

2000

2500

3000

2010 2011 2012 2013 2014 2015 2016 9M

2017Real GDP (SAR bn)Loans/GDP



Favorable demographics form the base for demand

Saudi Arabia’s working population increased at a CAGR of 3.4% from 2010 to 2017, faster than the

Kingdom’s total population (CAGR of 2.7%). Moreover, people less than 25 years of age represent 40%

of the aggregate population, indicating continued demand for housing. Rising income, urbanization,

and increasing nuclear families are expected to support the demand for the real estate sector in the

long term.

The Saudi population is highly skewed toward Riyadh, Jeddah, and Makkah, with more than 50% of the

total population situated here. Riyadh and Jeddah have a large population mainly due to intense

business and political activity, while Makkah and Madinah are popular tourist destinations. These

regions present an attractive opportunity for real estate sector to further flourish in the coming years.

Figure 16: Saudi population age group wise (million)

Source: The World Bank

Saudi Arabia regulations and reforms support the demand

While there exists a secular demand for residential/housing units, the demand supply mismatch has

required Saudi Arabian government to intervene in the form of regulations to boost

demand/encourage supply. These measures vary from imposing of tax on vacant land to

establishment of specialized credit institutions supporting the financing of real estate.

White Land Tax

White Land tax was introduced in 2015 and regulations were released in June 2016. White land is

defined as any idle land designated for residential or residential/commercial use within urban

boundaries. The regulation is aimed at addressing the housing shortage in urban areas. According to

JLL, the tax would be imposed on the following four phases:-

Phase 1: Undeveloped land with area exceeding 10,000 sq m.

Phase 2: Developed land with area exceeding 10,000 sq m.

Phase 3: Developed land with area exceeding 5,000 sq m from one plan

Phase 4: Developed land with area collectively exceeding 10,000 from one city

The Saudi government introduced the first phase by imposing 2.5% land tax on undeveloped urban

land larger than 10,000 sq. m planned for residential use in areas such as Riyadh, Jeddah, and Makkah.

-

5

10

15

20

25

30

35

2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E

0-14 15-59 60+



Landowners are required to pay the fees within one year of being issued the tax invoice. Moreover, the

housing ministry is expected to impose white land tax on commercial areas in the near future. Revenue

generated from white land tax would be utilized to fund the Ministry of Housings’ projects. However, the

second phase of white land tax would not be introduced before 2020.

Saudi Real Estate Refinance Company

In October 2017, the Public Investment Fund (PIF) announced the establishment of the Saudi Real

Estate Refinance Company (SRC) to boost the real estate market, increase its contribution to the GDP,

and raise the rate of ownership among Saudi nationals from 47% in 2017 to 52% by the end of 2020. The

demand for real estate financing in the Kingdom is expected to increase from SAR280 bn in 2017 to

SAR500 bn by 2026. SRC was launched in partnership with the Ministry of Housing and is expected to

refinance up to SAR 75 bn for the housing sector over the next five years, reaching SAR170 bn by 2026.

Off-plan Sales

Saudi Arabia, in 2016, lifted the ban it had introduced in 2009 on the purchase of properties that are in

the planning stage and permitted real estate developers to sell off-plan units. Strict measures were put

in place by the ministry for such transactions. Down payments should be made by a check or bank

transfer to escrow accounts, and cannot exceed 20% of the unit’s cost.

Saudi Arabia mandated that developers must guarantee structural and insulation works for buildings for

at least 10 years from the property’s completion date, in addition to the guarantee of at least a year for

electrical and mechanical works. Developers were also directed to pay 5% of the unit’s value if they fail

to deliver the property for 12 months or more.

“Wafi”, Saudi Arabia’s electronic program set up by the housing ministry, recorded around SAR60 bn in

off-plan sales with the number of applicants from Al Madinah amounting to 45,200 in October 2017.

Going forward, the majority of the new projects are expected to be delivered by the Ministry of Housing

focus on off-plan sales basis to increase residential flat affordability. By selling off-plan units, developers

receive direct payments from buyers, dispensing the need for interest-laden loans from banks,

expected to reflect in unit prices.

Saudi Arabia: View on key real estate markets

Saudi Arabia’s key real estate markets span Riyadh, Jeddah, Dammam, Madinah and across segments

of office space, retail and residential. Demand was subdued in 2017 due to overall economic

slowdown. Especially in case of office segment, additional supply is expected to cause more vacancies

and lower rents. The residential market is facing a mixed impact on demand because of expat exits as

well as push on affordable housing. Retail real estate demand is relatively resilient and can benefit from

government’s spending towards special allowance and generally expansionary budget.



Table 6: Saudi Arabia Real Estate Market Outlook 2018

Office Market Residential Market Retail Market

Demand/Supply

Higher supply would

continue to outpace

subdued demand in 2018.

Total supply would grow

15.0% YoY to 6.7 mn sq. m.

in 2018 in Riyadh, Jeddah,

and DMA (combined).

The number of new

projects in 2018 would be

limited due to continued

departure of expatriates

and increased charges on

dependents. However, the

affordable housing sector

would witness more activity

in terms of government

incentives. Total supply

would grow 2.2% YoY in

2018 to 2.4 mn sq. m. units

in Riyadh, Jeddah, and the

DMA region (combined).

Supply would grow 10.6%

YoY to 4.5 mn sq. m. in 2018

in Riyadh, Jeddah, and the

DMA region (combined).

Demand for retail space

would improve due to the

anticipated rise in

spending.

Occupancy Rates

Vacancies are likely to

increase further in 2018 on

higher supply and weak

demand.

The vacancy rates would

recover slightly, mainly in

the apartments market due

to a shift in focus from villas.

Vacancy rates are likely to

increase due to higher

supply. However, an

increase in demand mainly

shopping malls would

partially offset higher

supply.

Rents

Rents would continue to

deteriorate in 2018.

Rents would continue to

slow down in the near term.

However, increasing

activity in the affordable

market would provide

some cushion.

Rents would remain stable

due to more uptake of

retail space in the near

term.

Source: JLL reports.

Public Private Partnerships: New financing tool for infrastructure projects

In the infrastructure sector, public-private partnerships (PPPs) provide investors the opportunity to

access parts of the market once available only to the public sector. The demand for reforming

infrastructure across Saudi Arabia has increased, providing considerable incentive to attract more

private sector involvement and, in turn, investment. With the government now determined to shift from

oil dependency and introduce the National Transformation Program (NTP) and the Saudi Vision 2030,

the PPP model provides an important framework for international and regional investors and

developers to tap into a wide range of opportunities in the housing, education, and healthcare sectors

of the Kingdom.

The PPP model largely contributes to Saudi Arabia’s Vision 2030 aimed at increasing the share of private

sector investment in the country’s GDP from 40% in 2016 to 65% in 2020. Moreover, the plan intends to

increase the contribution of real estate partnerships from the current level of 5% to 10% by 2020.

According to MEED Projects, Saudi Arabia has the highest value of PPPs in the region, with 18 projects

with total value of USD42.9 billion announced as of September 2017. These investments are bifurcated



mostly into housing (54%) and transport sectors (37%). However, this is likely to change with the

extensive use of the PPP model in the aviation, housing, education, and healthcare sectors over the

next five years as the Saudi Arabian General Investment Authority (SAGIA) stated it would privatize

parts of these sectors.

Figure 17: Value of PPP projects Figure 18: PPP Sector contribution

Source: MEED Projects * IWPPs and IPPs are excluded, JLL Source: MEED Projects * IWPPs and IPPs are excluded, JLL

The legal and regulatory frameworks in Saudi Arabia continue to evolve and develop to provide an

environment that would encourage and facilitate the use of the PPP model. There are some challenges

to overcome, but significant progress was made in the last 18 months. The public and private sectors

show substantial interest in PPPs. The developing phase of the legislative structure did not discourage

early investors and developers from entering the PPP market to explore potential opportunities in real

estate, but some concrete steps would be needed in the near future to maintain the momentum.

Construction sector expected to recovery in 2018

Saudi Arabia’s construction sector is stagnating due to low public spending on projects, but is expected

to recover in 2018. In 2016, revenue from the construction sector declined to SAR159.64 bn. The

economic slowdown and the government's delay in payments to contractors negatively impacted the

sector and pushed some companies out of the market. Although several projects were executed over

the last few months, the sector remains sluggish compared with that in the previous years.

Figure 19: Construction industry value and Real Growth

Source: SAMA, BMI

The construction sector continued to gradually grow in 2017 as it began to recover from an expected

contraction in 2016. According to Faithful+Gould's report, contract awards remained flat at USD22 bn in

05

101520253035404550

KSA

Lib

ya

Ku

wa

it

Mo

roc

co

UA

E

Ira

n

Ba

hra

in

Tun

isia

Ira

q

Eg

yp

t

Om

an

Jord

an

Qa

tar

USD

bn

54%

26%

11%

5% 2%

2% Housing

Transport

Airports

Utilities

Education

Healthcare

USD 42.9 bn

-5.0%

-3.0%

-1.0%

1.0%

3.0%

5.0%

7.0%

9.0%

0

50

100

150

200

250

300

350

400

2016 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E

SA

R b

n

Construction industry value Construction industry value real growth



2017 compared with that in the previous year. However, contract awards gathered pace in 2H 2017. In

2018, the sector is expected to grow at 3.5%, as a result of increased government expenditure. Project

implementation would continue to recover and reach previous growth peak of 7.6% in 2020.

Real Estate Market Summary View

The Saudi real estate market’s performance remained subdued in 2016 and 2017 due to weak

economic conditions with negative sentiment further impacting activity levels and sales prices.

Occupancy levels had a negative impact across most asset classes, leading to reduction in rent.

However, we believe the current situation is short term and the market is reaching the bottom of the

cycle. The government is undertaking various initiatives to stimulate the real estate sector and

encouraging the private sector to play a key role in the process. Saudi Arabia’s focus on diversification

to the non-oil sector is defined by the Saudi Vision 2030 and the National Transformation Plan. Thus,

recovery in GDP in the coming years and the government’s aim to increase non-oil sector growth are

expected to support the real estate market in the coming years. However, oil prices, regional tension,

and the extent to which reforms impact the economy would pose as downside risks in the recovery of

the economy and real estate sector.



E. Private Equity Outlook Factors Negative Neutral Positive

Number of funds

Lon

g t

erm

po

sitiv

e

Deal activity

Exit via NOMU

Demand for private capital

Private Equity Outlook



Saudi Private Equity space is also gaining traction along with rest of economy. While the government is

encouraging small and medium enterprises by having Public Investment Fund (PIF) earmark part of their

investment for such enterprises, private equity investors are also increasing fund raising and seeking

investment deals in specific sectors - such as consumption, healthcare, education – which have long

term demographic drivers and appear relatively insulated from the fluctuations in oil prices and

changes in fiscal policy. Valuations have also become more attractive with the fall in public equity

markets. On the backdrop of Saudi Vision 2030, which envisages a greater role for private companies’

contribution to economy, the need for capital by such companies will provide opportunities for private

equity investors. The availability of NOMU as an exit vehicle in the public equity space has also

improved attractiveness of private equity as a viable investment route.

Private Equity Funds Assets under management

Private Equity as an investment asset class is attractive to investors for several reasons such as

comparatively higher returns, better visibility on assets through greater access to managements and

better forecasting capabilities than public equities. As a result, the asset values of private equity funds

as well as number of subscribers have grown steadily over the years.

Figure 20: PE Fund Assets and No. of subscribers (SAR bn)

Source: CMA

Although the no. of PE funds have remained more or less steady after the considerable decline in 2015,

asset value of PE funds has continued to witness sharp growth (except for a small QoQ decline in Q3

2017), with a CAGR of around 60% over 2013—17, reaching SAR 76 bn in Q3 2017. Number of subscribers

has also increased from 723 in H1 2013 to 1301 in Q3 2017.

10.9 11.5 13.3 13.7 13.8 22.9 23.5 25.8 26.2 27.4 62.3 62.2 77.1 75.9

600

800

1000

1200

1400

0

20

40

60

80

100

H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017

Asset Value (SAR bn) - LHS No. of subscribers - RHS



Figure 21: Breakup of sector focused funds, KSA

Source: CMA, based on 66 sample funds

Based on the sample of 66 currently active PE funds, just over half of them (34) are sector focused, with

the predominant sector being Healthcare, followed by Industrials, Food & Beverages and Education

Sector. Average term of these funds is 7.8 years, while average term extension is 2.2 years. 14 of the 66

funds are foreign-based, while the rest 52 are local.

Private Equity Deals

Private Equity deals space in Saudi Arabia is relatively smaller as compared to its GCC peers, both in

terms of value and volume (number of deals), with only about 36 disclosed deals closed in last five

years (2012—17). In 2016, 63% of the value invested in PE firms went to those in UAE, with Saudi Arabia

having 9% of the share. UAE also led in terms of deal volumes that year, accounting for 34% of the deals

while Saudi Arabia accounted for 8% of those.

Typical private equity deals in Saudi Arabia are structured as acquisitions of controlling interests or 100%

acquisitions, although there have been instances of acquisition of significant minority interest. Private

equity deals to acquire listed companies are very rare. The prominent target sectors for the deals have

been Retail, Financial Services, Healthcare, Education, and Food & Beverages.

Figure 22: Key PE Deals 2012—17: Top Sectors

Source: Capital IQ, Thomson Reuters

Private Equity Exit: NOMU Parallel Market

The Saudi Stock Exchange Tadawul launched the NOMU parallel market in February 2017, listing nine

Saudi companies out 77 that applied. NOMU is an alternative equity market with lighter listing

Healthcare

35%

Industrials

21% Food & Beverages

9%

Education

12%

Others

23%

7

5

4 4 4

3

2

0

1

2

3

4

5

6

7

8

Retail Financial

Services

Health Care Education Food and

Beverages

Consumer

Goods

Real Estate



requirements than the main market. It would function as an alternative platform for private companies

to go public, while investment in this market is restricted to qualified investors only. Due to lighter listing

requirements, NOMU can be an attractive exit route for private equity firms to offload their invested

stake and generate returns.

Table 7: Key Differences between Main Market and NOMU

Criteria Main Market NOMU

Minimum Market Cap SAR 100 mn SAR 10 mn

Public Shareholders At least 200 At least 35

Continuous Obligations

Disclosure of quarterly financial

statements within 30 calendar days from

the end of the period and year-end

financial statements within 90 calendar

days from the end of the period.

Disclosure of quarterly financial

statements within 45 calendar days from

the end of the period and year-end

financial statements within 90 calendar

days from the end of the period

Daily Fluctuation Limits ±10% ±20%

Source: Tadawul

Risk:

NOMU Parallel market Index has fallen 49% since its inception last year, indicating significantly poor

performance of the underlying stocks in the market, as compared to the main market. Due to this,

investors may be wary of investing in IPO’s of companies listing in NOMU.



F. Conclusion Overall, the year 2018 promises to be eventful for Saudi Arabian economy, starting with

generous government spending after last year’s constraints, higher inflation on account of

VAT and reforms in electricity and fuel prices to close gap with market rates. At the same

time, the adverse impact of price rise on consumption will be cushioned by government

allowances and support in the form of beneficial policies. The key risk is that the economy

either doesn’t respond or responds late. Past data suggests otherwise, and therefore gives

hope for a turnaround in the Saudi economy in 2018.



G. Annexure 1: Chart Pack

Annexure 1: Chart Pack



I. Macroeconomic Indicators

Figure 23: GDP (Constant prices) growth (quarterly

-% YoY) Figure 24: GDP growth (annual - % YoY)

Source: General Authority of Statistics Source: General Authority of Statistics

Figure 25: Non-oil GDP growth (quarterly - % YoY) Figure 26: Non-oil GDP growth (annual - % YoY)


Figure 27: Inflation (% YoY) Figure 28: Food inflation (% YoY)

Source: Saudi Arabia Monetary Authority (SAMA) Source: SAMA

Figure 29: PMI index Figure 30: Cement Sales (Mn tons)

Source: Bloomberg Source: Bloomberg

Q3 2017,

-0.4%

(5)

-

5

10

15

Q1

20

11

Q3

20

11

Q1

20

12

Q3

20

12

Q1

20

13

Q3

20

13

Q1

20

14

Q3

20

14

Q1

20

15

Q3

20

15

Q1

20

16

Q3

20

16

Q1

20

17

Q3

20

17

2017,

-0.7%

-25

-15

-5

5

15

25

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

2013

2016

Q3 2017,

3.7%

(5)

-

5

10

15

Q1

20

11

Q3

20

11

Q1

20

12

Q3

20

12

Q1

20

13

Q3

20

13

Q1

20

14

Q3

20

14

Q1

20

15

Q3

20

15

Q1

20

16

Q3

20

16

Q1

20

17

Q3

20

17

2017,

1.0%

-5

5

15

25

35

45

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

2013

2016

November

2017,

0.1%

-1

0

1

2

3

4

5

Jan

-12

Ma

y-1

2

Se

p-1

2

Jan

-13

Ma

y-1

3

Se

p-1

3

Jan

-14

Ma

y-1

4

Se

p-1

4

Jan

-15

Ma

y-1

5

Se

p-1

5

Jan

-16

Ma

y-1

6

Se

p-1

6

Jan

-17

Ma

y-1

7

Se

p-1

7

November

2017,

-0.8%

-6-4-202468

Jan

-12

Ma

y-1

2

Se

p-1

2

Jan

-13

Ma

y-1

3

Se

p-1

3

Jan

-14

Ma

y-1

4

Se

p-1

4

Jan

-15

Ma

y-1

5

Se

p-1

5

Jan

-16

Ma

y-1

6

Se

p-1

6

Jan

-17

December

2017,

57.3

485052545658606264

Ma

y-1

4

Au

g-1

4

No

v-1

4

Feb

-15

Ma

y-1

5

Au

g-1

5

No

v-1

5

Feb

-16

Ma

y-1

6

Au

g-1

6

No

v-1

6

Feb

-17

Ma

y-1

7

Au

g-1

7

No

v-1

7 1

2

3

4

5

6

Ja

n

Fe

b

Ma

r

Ap

r

Ma

y

Ju

n

Ju

l

Au

g

Se

p

Oc

t

No

v

De

c

2012 2013 2014

2015 2016 2017



Figure 31: Oil vs Non-oil revenues (% share) Figure 32: Annual fiscal balance (SAR bn)

Source: Saudi Arabia Finance Ministry, E- Estimate Source: Saudi Arabia Finance Ministry, E-Estimate

Figure 33: Current account balance - quarter (USD

bn) Figure 34: Current account balance -yearly (USD

bn)

Source: SAMA Source: SAMA

Figure 35: Current Account Balance (%GDP) Figure 36: Trade balance (SAR bn)


Figure 37: Trade balance change (% YoY) Figure 38: KSA breakeven oil price (USD/bl)

Source: SAMA Source: Ministry of Finance, Thomson Reuters, MEFIC estimate

0%

20%

40%

60%

80%

100%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018E

Oil revenues Non-oil revenues

-15

-5

5

15

25

-400

-200

0

200

400

600

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17E

Fiscal Balance (SAR bn) - LHS

Fiscal Balance (% GDP) - RHS

Q3 2017,

10.0

-25-15-55

15253545

Q1

20

10

Q3

20

10

Q1

20

11

Q3

20

11

Q1 2

012

Q3

20

12

Q1

20

13

Q3

20

13

Q1

20

14

Q3

20

14

Q1

20

15

Q3

20

15

Q1

20

16

Q3

20

16

Q1

20

17

Q3

20

17

66.8

158.5 164.8

135.4

73.8

-56.7

-24.9

-100

-50

0

50

100

150

200

2010 2011 2012 2013 2014 2015 2016

Q3 2017,

5.9

-15

-5

5

15

25

35

Q1

20

10

Q3

20

10

Q1

20

11

Q3

20

11

Q1

20

12

Q3 2

012

Q1

20

13

Q3

20

13

Q1

20

14

Q3

20

14

Q1

20

15

Q3

20

15

Q1

20

16

Q3

20

16

Q1

20

17

Q3

20

17

143

198

97

144

233 233

208

169

29 43

0

50

100

150

200

250

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

50.3%

-85

-65

-45

-25

-5

15

35

55

2008

2009

2010

2011

2012

2013

2014

2015

2016

69

.7

79

.4

74

.3

86

.0

10

4.8

88

.3

59

.5

67

.9

0

20

40

60

80

100

120

2010 2011 2012 2013 2014 2015 2016 2017F

Breakeven oil prices (USD) Average brent price (USD)



Figure 39: Total External Debt (SAR bn) Figure 40: SAMA Reserve Assets* (USD bn)

Source: SAMA Source: SAMA,*- includes special drawing rights

Figure 41: Reserve Assets (% MoM) Figure 42: Bank credit growth (% YoY)


Figure 43: Bank credit across major sectors (SAR

bn) Figure 44: Bank Deposits (SAR bn)


Figure 45: Loan-to-Deposit Ratio (%) Figure 46: NPL-to-Total Loans (%)


411.6

0

100

200

300

400

500

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

November

2017,

494

400 450 500 550 600 650 700 750 800

Jan

-10

Jul-1

0

Jan

-11

Jul-1

1

Jan

-12

Jul-1

2

Jan

-13

Jul-1

3

Jan

-14

Jul-1

4

Jan

-15

Jul-1

5

Jan

-16

Au

g-1

6

Feb

-17

Au

g-1

7

November

2017,

0.2

-4-3-2-1012345

Jan

-10

Jul-1

0

Jan

-11

Jul-1

1

Jan

-12

Jul-12

Jan

-13

Jul-1

3

Jan

-14

Jul-1

4

Jan

-15

Jul-1

5

Jan

-16

Au

g-1

6

Feb

-17

Au

g-1

7

November

2017,

-1.0

-20

-10

0

10

20

30

40

50

Jan

-98

Ap

r-9

9

Jul-0

0

Oc

t-0

1

Jan

-03

Ap

r-0

4

Jul-05

Oc

t-0

6

Jan

-08

Ap

r-0

9

Jul-1

0

Oc

t-1

1

Jan

-13

Ap

r-1

4

Jul-1

5

Oc

t-1

6

0

150

300

450

600

Q1

19

96

Q2

19

97

Q3

19

98

Q4

19

99

Q1

20

01

Q2

20

02

Q3

20

03

Q4

20

04

Q1 2

006

Q2

20

07

Q3

20

08

Q4

20

09

Q1

20

11

Q2

20

12

Q3

20

13

Q4 2

014

Q1

20

16

Q2

20

17

Manufacturing and Processing Buiding and Construction Commerce Services

November

2017,

1,599.6

0

500

1,000

1,500

2,000

Jan

-93

Jan

-95

Jan

-97

Jan

-99

Jan

-01

Jan

-03

Jan

-05

Jan

-07

Jan

-09

Jan

-11

Jan

-13

Jan

-15

Jan

-17

November

2017,

87.9

0.5

0.6

0.7

0.8

0.9

1.0

Jan

-93

Jan

-95

Jan

-97

Jan

-99

Jan

-01

Jan

-03

Jan

-05

Jan

-07

Jan

-09

Jan

-11

Jan

-13

Jan

-15

Jan

-17

Q3 2017,

1.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Q1

20

09

Q4

20

09

Q3

20

10

Q2

20

11

Q1

20

12

Q4

20

12

Q3

20

13

Q2

20

14

Q1

20

15

Q4

20

15

Q3

20

16

Q2 2

017



Figure 47: Money Supply/M3 growth (% YoY) Figure 48: Composition of M3 money supply (%

share)


Figure 49: Currency Outside Banks (% share of

M3) Figure 50: Time & Savings Deposits/Total Deposits

(%)


Figure 51: 3M SIBOR (%) Figure 52: Short term interest rate curve

(1w to 52 w)


Figure 53: Inflation (major sub-indices) Figure 54: House Rent Index (100=2007)

Source: SAMA Source: General Authority for Statistics

November

2017,

-1.4

-10

-5

0

5

10

15

20

25

30

Jan

-94

Jan

-96

Jan

-98

Jan

-00

Jan

-02

Jan

-04

Jan

-06

Jan

-08

Jan

-10

Jan

-12

Jan

-14

Jan

-16

0

20

40

60

80

100

Jan

-93

Jun

-94

No

v-9

5

Ap

r-97

Se

p-9

8

Ma

r-0

0

Au

g-0

1

Jan

-03

Jun

-04

No

v-0

5

Ma

y-0

7

Oc

t-0

8

Ma

r-1

0

Au

g-1

1

Feb

-13

Jul-1

4

De

c-1

5

Ma

y-1

7

Currency Outside bank Demand Deposits

Time and Savings Deposits Other Quasi Money Deposits

November

2017,

9.6

0

5

10

15

20

25

Jan

-93

Jun

-94

No

v-9

5

Ap

r-97

Se

p-9

8

Feb

-00

Jul-0

1

De

c-0

2

Ma

y-0

4

Oc

t-0

5

Ma

r-0

7

Au

g-0

8

Jan

-10

Jun

-11

No

v-1

2

Ap

r-1

4

Se

p-1

5

Feb

-17

15

20

25

30

35

40

45

Jan

-93

Jul-9

4

Jan

-96

Jul-9

7

Feb

-99

Au

g-0

0

Feb

-02

Se

p-0

3

Ma

r-0

5

Se

p-0

6

Ap

r-0

8

Oc

t-0

9

Ap

r-1

1

Oc

t-1

2

Ma

y-1

4

No

v-1

5

Ma

y-1

7

November

2017,

1.81

0

1

2

3

4

5

6

Jan

-200

7

Se

p-2

00

7

Ma

y-2

008

Jan

-200

9

Se

p-2

00

9

Ma

y-2

010

Jan

-201

1

Se

p-2

01

1

Ma

y-2

012

Jan

-201

3

Se

p-2

01

3

Ma

y-2

014

Jan

-201

5

Se

p-2

01

5

Ma

y-2

016

Jan

-201

7

Se

p-2

01

7 1.0

1.5

2.0

2.5

3.0

1M

3M

6M

12M

Dec-2016 Dec-2017

-0.8

November

2017

-0.5

-2.0 -5

0

5

10

15

Jan

-12

Se

p-1

2

Ma

y-1

3

Jan

-14

Se

p-1

4

Ma

y-1

5

Jan

-16

Se

p-1

6

Ma

y-1

7

Food and beverages

Transport

Housing , Water, Electricity, Gas, and other fuels

84.9

80

85

90

95

100

105

Q1

20

14

Q2

20

14

Q3

20

14

Q4

20

14

Q1

20

15

Q2 2

015

Q3 2

015

Q4

20

15

Q1

20

16

Q2

20

16

Q3

20

16

Q4

20

16

Q1

20

17

Q2

20

17

Q3

20

17



Figure 55: ATM Cash Withdrawals (SAR bn) Figure 56: Saudi unemployment rate (%)

Source: SAMA Source: Bloomberg

Figure 57: Competitiveness ranking/indicator Figure 58: FDI (accumulated, SAR billions)

Source: World Economic Forum (2016-2017) Source: SAMA

Figure 59: External debt-to-GDP (%) Figure 60: POS Transactions Sales (SAR bn)

Source: International Monetary Fund Source: SAMA

Figure 61: Mobile/Telecom Subscribers (mn) Figure 62: Automobile Sales (‘000s)

Source: Ministry of Communication and IT, Q3 2016 taken as

average of Q2 and Q4 2016 Source: Car Sales Base

November

2017,

58.6

01020304050607080

Jul-9

6

Oc

t-9

7

Jan

-99

Ap

r-0

0

Jul-0

1

Oc

t-0

2

Jan

-04

Ap

r-0

5

Jul-0

6

Oc

t-0

7

Jan

-09

Ap

r-1

0

Jul-1

1

Oc

t-1

2

Jan

-14

Ap

r-1

5

Jul-1

6

Oc

t-1

7

Q3 2017,

12.8

10.5

11.0

11.5

12.0

12.5

13.0

Q1

20

12

Q3

20

12

Q1

20

13

Q3

20

13

Q1

20

14

Q3

20

14

Q1

20

15

Q3

20

15

Q1

20

16

Q3

20

16

Q1

20

17

Q3 2

017

16 18

29

38

48

66

0

10

20

30

40

50

60

70

United

Arab

Qatar Saudi

Arabia

Kuwait Bahrain Oman

868.1

0

200

400

600

800

1000

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017,

18%

0.0

0.1

0.1

0.2

0.2

0.3

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

0

5

10

15

20

Jan

-95

Jun

-96

No

v-9

7

Ap

r-9

9

Se

p-0

0

Feb

-02

Jul-0

3

De

c-0

4

Ma

y-0

6

Oc

t-0

7

Ma

r-0

9

Au

g-1

0

Jan

-12

Jun

-13

No

v-1

4

Ap

r-16

Se

p-1

7

November 2017,

16.8

0

5

10

15

20

Jan

-95

Jun

-96

No

v-9

7

Ap

r-9

9

Se

p-0

0

Feb

-02

Jul-0

3

De

c-0

4

Ma

y-0

6

Oc

t-0

7

Ma

r-0

9

Au

g-1

0

Jan

-12

Jun

-13

No

v-1

4

Ap

r-1

6

Se

p-1

7

November 2017,

16.8

679.5

0.0

200.0

400.0

600.0

800.0

1,000.0

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016



Figure 63: Electricity Generation (TWh) Figure 64: Electricity Generation - Quarterly (TWh)

Source: Electricity and Cogeneration Regulatory Authority Source: Saudi Electric Company

Figure 65: Cement Prices (SAR, 50kg) Figure 66: Steel Prices (SAR/ton)


Figure 67: Expat Remittances (SAR bn)

Source: SAMA

287.4

0

50

100

150

200

250

300

350

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

103.6

0

20

40

60

80

100

120

Q1 2

015

Q2

20

15

Q3

20

15

Q4

20

15

Q1

20

16

Q2

20

16

Q3

20

16

Q4

20

16

Q1

20

17

Q2

20

17

Q3

20

17

November

2017,

13.0

10

11

12

13

14

15

16

Jan

-07

Se

p-0

7

Ma

y-0

8

Jan

-09

Se

p-0

9

Ma

y-1

0

Jan

-11

Se

p-1

1

Ma

y-1

2

Jan

-13

Se

p-1

3

Ma

y-1

4

Jan

-15

Se

p-1

5

Ma

y-1

6

Jan

-17

Se

p-1

7

November

2017,

2,361

8

1,008

2,008

3,008

4,008

5,008

6,008

Jan

-07

Se

p-0

7

Ma

y-0

8

Jan

-09

Se

p-0

9

Ma

y-1

0

Jan

-11

Se

p-1

1

Ma

y-1

2

Jan

-13

Se

p-1

3

Ma

y-1

4

Jan

-15

Se

p-1

5

Ma

y-1

6

Jan

-17

Se

p-1

7

November

2017

12.0

0

5

10

15

20

Jan

-95

Jan

-97

Jan

-99

Jan

-01

Jan

-03

Jan

-05

Jan

-07

Jan

-09

Jan

-11

Jan

-13

Jan

-15

Jan

-17



II. Oil Indicators

Figure 68: Saudi Oil Production (mbpd) Figure 69: Saudi Domestic Consumption (mbpd)

Source: Bloomberg Source: Reuters Datastream

Figure 70: Saudi Oil Export (mbpd) Figure 71: OPEC Oil Production (mbpd)

Source: Ministry of Petroleum, JODI, Source: Bloomberg

Figure 72: Global Oil Supply/Demand (mbpd) Figure 73: US Oil Production (mbpd)

Source: Bloomberg Source: Bloomberg

Figure 74: US Oil Inventory (mb) Figure 75: US Rig Count

Source: Reuters Eikon Source: Bloomberg

December

2017,

9.95

0

2

4

6

8

10

12

De

c-7

0

Au

g-7

3

Ap

r-7

6

De

c-7

8

Au

g-8

1

Ap

r-8

4

De

c-8

6

Au

g-8

9

Ap

r-9

2

De

c-9

4

Au

g-9

7

Ap

r-0

0

De

c-0

2

Au

g-0

5

Ap

r-0

8

De

c-1

0

Au

g-1

3

Ap

r-1

6

June 2016,

3.9

0

1

2

3

4

5

1965

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

2013

2016

October 2017,

6.9

4

5

6

7

8

9

Jan

-02

Oc

t-0

2

Jul-0

3

Ap

r-0

4

Jan

-05

Oc

t-05

Jul-0

6

Ap

r-0

7

Jan

-08

Oc

t-0

8

Jul-0

9

Ap

r-1

0

Jan

-11

Oc

t-1

1

Jul-1

2

Ap

r-1

3

Jan

-14

Oc

t-1

4

Jul-15

Ap

r-1

6

Jan

-17

Oc

t-1

7

November

2017,

32.5

10

15

20

25

30

35

40

De

c-8

7

Au

g-8

9

Ap

r-9

1

De

c-9

2

Au

g-9

4

Ap

r-9

6

De

c-9

7

Au

g-9

9

Ap

r-01

De

c-0

2

Au

g-0

4

Ap

r-0

6

De

c-0

7

Au

g-0

9

Ap

r-1

1

De

c-1

2

Au

g-1

4

Ap

r-1

6-6

-4

-2

0

2

4

Ma

r-9

5

Jul-9

6

No

v-9

7

Ma

r-9

9

Jul-0

0

No

v-0

1

Ma

r-0

3

Jul-0

4

No

v-0

5

Ma

r-0

7

Jul-0

8

No

v-0

9

Ma

r-11

Jul-1

2

No

v-1

3

Ma

r-1

5

Jul-1

6

No

v-1

7

November

2017,

1.0

November

2017,

9.68

2

4

6

8

10

Jan

-97

Ma

r-9

8

Ma

y-9

9

Jul-0

0

Se

p-0

1

No

v-0

2

Jan

-04

Ma

r-0

5

Ma

y-0

6

Jul-0

7

Se

p-0

8

No

v-0

9

Jan

-11

Ma

r-1

2

Ma

y-1

3

Jul-1

4

Se

p-1

5

No

v-1

6

November

2017,

453.7

0

100

200

300

400

500

600

Au

g-8

2

Se

p-8

4

Oc

t-8

6

No

v-8

8

De

c-9

0

Jan

-93

Feb

-95

Ma

r-9

7

Ap

r-9

9

Ma

y-0

1

Jun

-03

Jul-0

5

Au

g-0

7

Se

p-0

9

Oc

t-1

1

No

v-1

3

De

c-1

5

December

2017,

747

0

400

800

1200

1600

Jul-8

7

Ma

y-8

9

Ma

r-9

1

Jan

-93

No

v-9

4

Se

p-9

6

Jul-9

8

Ma

y-0

0

Ma

r-02

Jan

-04

No

v-0

5

Se

p-0

7

Jul-0

9

Ma

y-1

1

Ma

r-1

3

Jan

-15

No

v-1

6



III. Stock Market Indicators

Figure 76: TASI and Oil Figure 77: TASI Price-to-Earnings Ratio (x)

Source: Bloomberg Source: SAMA, Tadawul

Figure 78: Stock Market Turnover (SAR bn) Figure 79: Domestic Shares held by Domestic

Investment Funds (SAR bn)

Source: Tadawul, SAMA Source: SAMA

Figure 80: Share Ownership Status Figure 81: Total Assets of Investment funds (SAR

bn)


66.9

December

2017,

7226.3

0

5000

10000

15000

20000

25000

0

50

100

150

Jun

-97

No

v-9

8

Ap

r-0

0

Se

p-0

1

Feb

-03

Jul-0

4

De

c-0

5

Ma

y-0

7

Oc

t-0

8

Ma

r-1

0

Au

g-1

1

Jan

-13

Jun

-14

No

v-1

5

Ap

r-1

7Brent - USD/bl (LHS) TASI (RHS)

December

2017,

15.4

0

20

40

60

80

100

120

Au

g-0

5

Ma

y-0

6

Feb

-07

No

v-0

7

Au

g-0

8

Ma

y-0

9

Feb

-10

No

v-1

0

Au

g-1

1

Ma

y-1

2

Feb

-13

No

v-1

3

Au

g-1

4

Ma

y-1

5

Feb

-16

No

v-1

6

Au

g-1

7

December

2017,

87.4

0

200

400

600

800

1,000

Jan

-04

No

v-0

4

Se

p-0

5

Jul-0

6

Ma

y-0

7

Ma

r-0

8

Jan

-09

No

v-0

9

Se

p-1

0

Jul-1

1

Ma

y-1

2

Ma

r-1

3

Jan

-14

Oc

t-1

4

Au

g-1

5

Jun

-16

Ap

r-1

7

0

20

40

60

80

100

Q1

19

98

Q1

19

99

Q1

20

00

Q1

20

01

Q1

20

02

Q1

20

03

Q1

20

04

Q1

20

05

Q1

20

06

Q1

20

07

Q1

20

08

Q1

20

09

Q1

20

10

Q1

20

11

Q1

20

12

Q1

20

13

Q1

20

14

Q1

20

15

Q1

20

16

Q1

20

17

0%20%40%60%80%

100%

Jul-2

01

5

Se

p-2

01

5

No

v-2

01

5

Jan

-201

6

Ma

r-2

01

6

Ma

y-…

Jul-2

01

6

Se

p-2

01

6

No

v-2

01

6

Jan

-201

7

Ma

r-2

01

7

Ma

y-…

Jul-2

01

7

Se

p-2

017

No

v-2

01

7

Individuals Institutions Govt. Related Entities

GCC Investors Foreign Investors

87.8

0

20

40

60

80

100

120

140

160

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016



IV. Corporate earnings

Figure 82: TASI Revenue and YoY growth

(Quarterly) Figure 83: TASI Revenue and YoY growth (Annual)

Source: Reuters Eikon Source: Reuters Eikon

Figure 84: TASI EBITDA and YoY growth (Quarterly) Figure 85: TASI EBITDA and YoY growth (Annual)


Figure 86: TASI PAT and YoY growth (Quarterly) Figure 87: TASI PAT and YoY growth (Annual)


Figure 88: TASI EBITDA and PAT margin (%) -

Quarterly Figure 89: TASI EBITDA and PAT margin (%) -

Annual

Q3 2017,

169.2 3.5%

(20) (10) - 10 20 30 40

0

50

100

150

200

250

Q1

20

08

Q3

20

08

Q1

20

09

Q3

20

09

Q1

20

10

Q3

20

10

Q1

20

11

Q3

20

11

Q1 2

012

Q3

20

12

Q1

20

13

Q3

20

13

Q1

20

14

Q3

20

14

Q1

20

15

Q3

20

15

Q1

20

16

Q3

20

16

Q1

20

17

Rev (SAR bn)- LHS Rev (%yoy) - RHS

682.5

4.4

(10)

-

10

20

30

0

200

400

600

800

2008

2009

2010

2011

2012

2013

2014

2015

2016

Rev (SAR bn)- LHS Rev (%yoy) - RHS

Q3 2017

61.1 9.12

(40)

(20)

-

20

40

60

0

20

40

60

80

Q1

20

08

Q3

20

08

Q1

20

09

Q3

20

09

Q1

20

10

Q3

20

10

Q1

20

11

Q3 2

011

Q1

20

12

Q3

20

12

Q1

20

13

Q3

20

13

Q1

20

14

Q3

20

14

Q1

20

15

Q3

20

15

Q1

20

16

Q3

20

16

Q1

20

17

EBITDA (SAR bn) - LHS EBITDA (%yoy) - RHS

208.7

4.9

(20)

(10)

-

10

20

30

0

50

100

150

200

250

2008

2009

2010

2011

2012

2013

2014

2015

2016

EBITDA (SAR bn) - LHS EBITDA (%yoy) - RHS

Q3 2017

32.9 18.75

(200)

(150)

(100)

(50)

-

50

100

150

-40

-20

0

20

40


100.0

0.2

(20)

(10)

-

10

20

30

40

0

50

100

150

2008

2009

2010

2011

2012

2013

2014

2015

2016


Q3 2017, 36.1

19.44

-40

-20

0

20

40

60

Q1

20

08

Q3

20

08

Q1

20

09

Q3

20

09

Q1

20

10

Q3

20

10

Q1

20

11

Q3

20

11

Q1

20

12

Q3

20

12

Q1

20

13

Q3

20

13

Q1

20

14

Q3

20

14

Q1 2

015

Q3

20

15

Q1

20

16

Q3

20

16

Q1

20

17

Q3

20

17

EBITDA margin Net profit margin

35.5 31.5 31.9 30.9 29.1 29.9 29.5 30.4 30.6

11.7 15.6 16.8 16.9 16.5 16.9 17.2

15.3 14.6

0

10

20

30

40

2008

2009

2010

2011

2012

2013

2014

2015

2016

EBITDA margin (%) PAT margin (%)



V. Tadawul Sector Earnings Performance

Earnings (SAR mn) Market Cap (SAR mn) Q3 2017 Q3 2016 Q2 2017 % YoY % QoQ

Materials 575,453 8,702.4 7,908.4 6,077.1 10.0 43.2

Banks 508,526 11,374.1 9,951.1 11,324.0 14.3 0.4

Telecommunication Services 157,744 2,390.0 1,664.4 2,203.6 43.6 8.5

Real Estate 108,710 381.0 288.0 351.1 32.3 8.5

Utilities 89,143 5,300.6 4,434.4 2,269.4 19.5 133.6

Food, Beverage & Tobacco 87,531 1,585.0 952.1 1,011.0 66.5 56.8

Insurance 41,082 740.9 851.9 287.9 -13.0 157.3

Diversified Financials 36,181 261.5 134.3 227.2 94.7 15.1

Energy 31,846 784.9 118.9 486.8 560.4 61.2

Health Care 28,547 292.0 274.4 277.1 6.4 5.4

Retailing 26,822 295.9 348.3 275.6 -15.1 7.3

Transportation 13,949 285.8 341.6 243.8 -16.3 17.2

Consumer Services 13,525 232.9 355.7 314.2 -34.5 -25.9

Capital Goods 9,795 0.4 -33.9 28.2 -101.1 -98.7

Commercial Services 7,789 125.9 137.7 118.2 -8.6 6.5

Food & Staples Retailing 7,191 152.8 63.1 89.0 142.3 71.6

Media 5,674 17.9 -69.3 -16.0 -125.8 -212.1

Pharmaceuticals 3,749 7.9 6.8 46.6 17.3 -83.0

Consumer Durables & Apparel 3,223 -53.7 -40.5 -6.6 32.5 711.3

Total 1,756,477 32,878 27,687 25,608 18.7 28.4

Source: Reuters Eikon, Bloomberg, MCap and results as of January 21, 2017



H. Annexure 2: Saudi Arabia

Key Statistics

Annexure 2: Saudi Arabia Key Statistics


Annexure 2: Saudi Arabia Key Statistics

Data 2011 2012 2013 2014 2015 2016 2017E 2018F

Economic Output

Nominal GDP (USD bn) 669.5 734.0 744.3 753.8 653.2 646.4 678.5 708.5

Nominal GDP YoY (%) 27.1 9.6 1.4 1.3 -13.3 -2.1 5.0 4.4

Real GDP YoY (%) 10.0 5.4 2.7 3.6 3.4 1.2 1.9 1.1

Budget

Revenue (SAR bn) 1117.8 1247.4 1156.4 1044.4 615.9 519.0 696.0 783.0

Oil Revenue (SAR bn) 1034.4 1144.8 1035.0 913.3 446.4 329.0 440.0 492.0

Non-oil Revenue (SAR bn) 83.4 102.6 121.3 131.0 169.5 190.0 256.0 291.0

Expenditure (SAR bn) 826.7 873.3 976.0 1109.9 978.1 830.0 926.0 978.0

Surplus/(Deficit) (SAR bn) 291.1 374.1 180.3 -65.5 -362.2 -311.0 -230.0 -195.0

Surplus/(Deficit) (% GDP) 11.6 13.6 6.5 -2.3 -15.0 -12.8 -8.9 -7.3

Gross Public Debt (SAR bn) 135.5 83.8 60.1 44.3 142.3 316.5 438.0 555.0

Gross Public Debt (% GDP) 5.4 3.0 2.2 1.6 5.9 12.3 17.0 21.0

Oil statistics

Production (mbpd) 9.3 9.8 9.6 9.7 10.2 10.2 10.3 9.7

Exports (mb) 2634.6 2783.8 2763.3 2611.0 2614.5 2799.0 2557.9 2584.6

Domestic consumption (mb) 1321.4 1408.6 1423.8 1516.8 1586.5 1535.1 1583.2 1609.1

Trade & External sector

Exports (US$ bn) 364.7 388.4 375.9 342.4 203.6 183.6 239.8 242.2

Oil Exports (US$ bn) 317.6 337.5 321.9 284.6 152.9 136.2 136.3 147.3

Imports (US$ bn) 131.6 155.6 168.2 173.8 174.7 140.2 204.3 208.1

Trade surplus/(deficit) (US$ bn) 233.1 232.8 207.7 168.6 28.9 43.4 35.5 34.1

Current Account (US$ bn) 158.5 164.8 135.4 73.8 -56.7 -24.9 10.8 15.1

Current Account (% GDP) 23.7 22.4 18.2 9.8 -8.7 -3.9 1.5 2.0

SAMA forex reserves (US$ bn) 544.0 656.6 725.7 732.4 616.4 535.8 NA NA

Inflation (%) 3.7 2.9 3.5 2.7 2.2 3.5 1.0 1.7

Demographics

Population (mn) 28.4 29.2 30.0 30.8 31.4 31.7 32.7 33.3

Saudi unemployment rate

(% population) 12.4 12.1 11.7 11.7 11.5 12.3 12.3 12.0

Source: SAMA, General Authority of Statistics, Reuters, IMF, MEFIC Research, E- Estimate, F- Forecast

Notes


Notes

Disclaimer


Disclaimer

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whom it is addressed and may not be reproduced, further distributed to any other person or published,

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This document is based on data sources that are publicly available and are thought to be reliable.

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its advisors, directors or employees can guarantee the accuracy, reasonableness or completeness of

the information received from any sources consulted for this publication, and neither MEFIC Capital nor

its advisors, directors or employees accepts any liability whatsoever (in negligence or otherwise) for any

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Further, this document is not an offer to buy or sell any security, commodity or currency. This document

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The investments referred to in this document may not be suitable for all investors.

This document is not to be relied upon and should not be used in substitution for the exercise of

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This document may contain certain statements, estimates, and projections with respect to the

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